NS&I Direct Isa savers face second rate cut in five months despite given the green light to take in more cash

More than 310,000 savers with nearly £3billion in National Savings & Investments Direct Isa will see their rate cut to 1.5 per cent from 1.75 per cent from February 27 next year. It is the second cut in five months.

In September the rate was chopped from 2.25 per cent to 1.75 per cent. The decrease comes even though the Government increased the extra amount it wants to raise through NS&I in its current financial year to March 31, 2014.

In last week’s Autumn Statement, the target was raised to a maximum of £4billion, up from £2billion. At the time, experts had predicted this would help stave off future rate cuts from National Savings.

Rate cut: NS&I is to chop the rate on its Direct Isa by 0.25 points in February

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NS&I’s two-year Fixed Rate Savings Certificates rate is also down 0.25 percentage points to 0.9 per cent tax-free - equivalent to 1.12 per cent before tax for basic-rate taxpayers and 1.5 per cent for 40 per cent payers.

NS&I writes to savers a month before their certificates mature inviting them to rollover their investments.

Those who have already received a maturity letter will earn the higher rate of 1.15 per cent.

Guaranteed Growth Bonds rates are also down 0.25 points and pay 1 per cent after tax (1.25 per cent before) for one year, 1.2 per cent (1.5 per cent) for two years and 1.36 per cent (1.7 per cent) for three years.